“The Genius of Investing Is Recognizing The Direction Of A Trend, Not Catching The Highs and Lows” ( Famous Quote)
An overwhelming 73% of the respondents still identify commercial real estate and short term cash as their preferred place for “investment”. This is a reflection in the downturn of the stock market and lack of confidence in Wall Street. Their faith signifies a belief that commercial real estate is not a bubble and that investors can continue to earn competitive returns. This finding is significant because private investors typically rely on leverage to a greater degree than institutional investors and are not as adverse to risk. ( Credit To Lee & Assoc)
Reis Inc., a commercial real estate research firm, reported last week that average rents in the office sector dropped just 0.8% in the first quarter of 2010, compared with the last quarter of 2009. Rents were stable or rose in 23 of the 79 markets Reis tracks. This may not be a bottom, but the scope of the decline marks a considerable improvement from just three months ago, when rents in 70 of the markets fell. Given the reporting lag, the bottom may well have already been reached.
If so, this moment has important implications for investors, the banking and real estate sectors and the economy as a whole. Last year commercial real estate had a “dark cloud” hanging over the banking industry, echoing comments that were coming from the Federal Reserve. Now the cloud, like many aspects of the financial crisis, seems to be dissipating.
That’s not all that surprising, given the recent positive economic news. Unemployment seems to be stabilizing and even improving, and workers need office space. Consumers have been spending, returning to malls in droves.
Rock-bottom interest rates have allowed strapped developers and real estate owners to refinance on favorable terms.
It’s true that many commercial real estate assets have already rallied strongly since bottoming in March of last year. The Vanguard REIT Index fund was trading this week at $51.40, a high for the last 12 months, and double its low for the same period, to cite just one widely held example. Those who were willing to embrace considerable risk when the economy seemed to be collapsing have been amply rewarded, as they should be.
It’s rarely practical for individuals to invest directly in commercial real estate, but there are plenty of other ways to get in via partnerships and Real Estate Investment Trusts.
In a very large market, if you’re not invested in real estate at all, you’re shorting yourself on a significant asset class, that can give you passive income and significant appreciation., whether its an apartment building in Massachusetts or an Industrial Building here adjacent to Los Angeles International Airport, its an excellent time to invest.
Depending on who you ask, it was either legendary author Mark Twain or famed humorist Will Rogers who once said, “Buy land. They aren’t making any more of it.”
Enjoy Your Day!